Key Concepts in Economics and Agribusiness Management
Unitary elastic supply curve
=1
Reason for drawing supply curves backward
Alfred Marshall
Cause of price increase in textbooks
An increase in the demand for college degrees
Effect of income increase on demand for golf courses
An increase in the demand for golf courses
Indifference curve
At all points along it, an individual is realizing the same level of utility
Budget line
Includes the price of the goods being consumed and total expenditures on the goods being consumed
Consumer purchases of chicken and beef
Increase for chicken and decrease for beef
Increase in greenhouses in New York City
Increase in the supply of flowers
Price and quantity relationship
Inelastic
Law of Demand
Inverse relationship between price and quantity demanded
Normative economics
Involves opinions, judgments, and value-based statements
Tangency of indifference curve and budget line
Is found where the slope of the indifference curve (MRS) is equal to the price ratio
Individual firm's supply curve
MC above the break-even point
Agribusiness management
Making good economic decisions in a rapidly-changing industry
Blue jeans elasticity
More elastic than all pants
Income elasticity of demand for food
Greater than 0
Inferior good
Has a negative income elasticity
Inelastic supply curve
Has a steep slope
Market demand curve for wheat
Horizontal summation of all individual wheat demand curves
Supply schedule
How quantity supplied changes with different prices
Elasticity measurement
How responsive one variable is to another
Law of Diminishing Marginal Utility
Implies that the rate of change in total utility increases as more units of a good are consumed
Ceteris paribus
In economics means holding all else constant
Increase in fertilizer price
Shift in the supply of fertilizer
Technological change
Shifts the supply curve to the right
Market supply curve
Slopes up due to the Law of Supply
Hamburgers and hamburger buns
Substitutes
Consumer utility maximization
Tangency of the budget line and the indifference curve
Elasticity of supply
Tells how responsive supply is to changes in price
Economics
The allocation of scarce resources among non-competitive ends
Opportunity set
The collection of all combinations of goods that are affordable
Scarcity
The fundamental principle of economics
Increase in soybean price
Decrease in the supply of wheat and increase in the supply of soybeans
Effect of a drought on grains
Decrease the supply of grains
Individual demand curve for pizza
Derived with the price of pizza, the price of one other good, and income
Positive economics
Descriptive statements that can be tested and validated
Determinants of supply
Exclude income
Farm value
For every dollar spent in the grocery store, the farm value is 15%
Least elastic demand curve
Oranges
Sugar (sucrose) and corn syrup (fructose)
Perfect substitutes in production and consumption
Good year for wheat farmers
Price of wheat will decrease
Utils
Real, measurable numbers that measure satisfaction
Capital
Refers to physical and financial capital
Effect of oil price increase on natural gas supply
The quantity supplied of natural gas will decrease
Supply definition
The relationship between the price of a good and amount available
Marginal rate of substitution
The slope of the indifference curve
Elasticities
Unitless
Cardinal utility
When an economist says that an apple gives a quantifiable level of utility
Cross-price elasticity of supply of corn and wheat
Zero
Firm's supply below minimum AVC
Zero
